Question 1

The primary objective of analytical procedures used in the final review stage of an audit is to

Accepted Answer

A)  obtain evidence from details tested to corroborate particular assertions. 
B)  identify areas that represent specific risks relevant to the audit. 
C)  assist the auditor in looking for potential material misstatements. 
D)  satisfy doubts when questions arise about a client's ability to continue operations. 
A)  obtain evidence from details tested to corroborate particular assertions. 
B)  identify areas that represent specific risks relevant to the audit. 
C)  assist the auditor in looking for potential material misstatements. 
D)  satisfy doubts when questions arise about a client's ability to continue operations.

Question 2

You sent a legal letter to a lawyer who had invoiced your client. The lawyer replied that "his practice consists of conducting real estate closings, and so he could not respond to the letter." What impact does this have on the financial statement audit?

Accepted Answer

A)  There is no impact upon the financial statement audit. 
B)  The audit opinion will need to be qualified. 
C)  The auditor will need to provide a denial of opinion. 
D)  Additional information is needed by reference to legal invoices from this lawyer. 
A)  There is no impact upon the financial statement audit. 
B)  The audit opinion will need to be qualified. 
C)  The auditor will need to provide a denial of opinion. 
D)  Additional information is needed by reference to legal invoices from this lawyer.

Question 3

An important part of evaluating whether the financial statements are fairly stated is summarizing the misstatements uncovered in the audit. Whenever the auditor uncovers misstatements that are in themselves material,

Accepted Answer

A)  entries should be proposed to the client to correct the statements. 
B)  no entries need to be made but footnote disclosure is required. 
C)  it is necessary to combine individually immaterial misstatements with the material misstatements and make entries to correct the statements. 
D)  it is necessary to combine individually immaterial misstatements with the material misstatements and make full disclosure in the footnotes. 
A)  entries should be proposed to the client to correct the statements. 
B)  no entries need to be made but footnote disclosure is required. 
C)  it is necessary to combine individually immaterial misstatements with the material misstatements and make entries to correct the statements. 
D)  it is necessary to combine individually immaterial misstatements with the material misstatements and make full disclosure in the footnotes.

Question 4

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork. The auditor should

Accepted Answer

A)  advise management to adjust the balance sheet to reflect the acquisition. 
B)  issue pro forma financial statements giving effect to the acquisition as if it had occurred at year-end. 
C)  advise management to disclose the acquisition in the notes to the financial statements. 
D)  disclose the acquisition in the opinion paragraph of the auditor's report. 
A)  advise management to adjust the balance sheet to reflect the acquisition. 
B)  issue pro forma financial statements giving effect to the acquisition as if it had occurred at year-end. 
C)  advise management to disclose the acquisition in the notes to the financial statements. 
D)  disclose the acquisition in the opinion paragraph of the auditor's report.

Question 5

Subsequent events affecting the valuation of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the

Accepted Answer

A)  culmination of conditions that existed at the balance sheet date. 
B)  final estimates of losses relating to casualties occurring in the subsequent events period. 
C)  discovery of new conditions occurring in the subsequent events period. 
D)  preliminary estimate of losses relating to new events that occurred subsequent to the balance sheet date. 
A)  culmination of conditions that existed at the balance sheet date. 
B)  final estimates of losses relating to casualties occurring in the subsequent events period. 
C)  discovery of new conditions occurring in the subsequent events period. 
D)  preliminary estimate of losses relating to new events that occurred subsequent to the balance sheet date.

Question 6

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

Accepted Answer

•Events that have a direct effect on the

Question 7

State the three conditions required for a contingent liability to exist.

Accepted Answer

Three conditions req

Question 8

State the three main reasons why it is essential that working papers be thoroughly reviewed by another member of the audit firm at the completion of the audit.

Accepted Answer

1.To evaluate the performance of inexper

Question 9

Kendra is inquiring about subsequent events with regards to lawsuits and contingent claims. To obtain a meaningful answer, Kendra should hold the enquiry with

Accepted Answer

A)  the Vice President of Legal of the company. 
B)  the accountant in charge of the legal liability reconciliation. 
C)  the mail clerk. 
D)  the assistant controller. 
A)  the Vice President of Legal of the company. 
B)  the accountant in charge of the legal liability reconciliation. 
C)  the mail clerk. 
D)  the assistant controller.

Question 10

The auditor has a responsibility to review transactions and activities occurring after the year-end to determine whether anything occurred that might affect the valuation or disclosure of the statements being audited. The auditing procedures required to verify these transactions are commonly referred to as the review for

Accepted Answer

A)  contingent liabilities. 
B)  subsequent year's transactions. 
C)  late unusual occurrences. 
D)  subsequent events. 
A)  contingent liabilities. 
B)  subsequent year's transactions. 
C)  late unusual occurrences. 
D)  subsequent events.

Question 11

The following events all occurred after the balance sheet date (6/30/15) but prior to the auditor's report (9/10/15). Which one would require an adjustment to the account balances as of 6/30/15?

Accepted Answer

A)  client will market a new series of equity securities ($2 million of preferred stock) on 8/1/15 
B)  unused equipment on the books at 6/30/15 for $100 000 was disposed of 7/31/15 for $60 000 
C)  securities costing $30 000 held for temporary investment on 6/30/15 declined in value by one-third when the market took a plunge on 8/15/15 
D)  inventory valued at $100 000 on 6/30/15 was destroyed in a fire on 8/1/15 
A)  client will market a new series of equity securities ($2 million of preferred stock) on 8/1/15 
B)  unused equipment on the books at 6/30/15 for $100 000 was disposed of 7/31/15 for $60 000 
C)  securities costing $30 000 held for temporary investment on 6/30/15 declined in value by one-third when the market took a plunge on 8/15/15 
D)  inventory valued at $100 000 on 6/30/15 was destroyed in a fire on 8/1/15

Question 12

What audit approach is used to search for unknown commitments?

Accepted Answer

A)  include as part of the search for subsequent events 
B)  conduct with substantive tests associated with the cutoff assertion 
C)  perform as part of the audit of each cycle or audit area 
D)  include with the legal letter sent to lawyers 
A)  include as part of the search for subsequent events 
B)  conduct with substantive tests associated with the cutoff assertion 
C)  perform as part of the audit of each cycle or audit area 
D)  include with the legal letter sent to lawyers

Question 13

State three types of information that should be included in a standard letter of inquiry of a client's law firms.

Accepted Answer

•A list prepared by management of outsta

Question 14

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and

Accepted Answer

A)  the auditor's opinion as to the expected outcome. 
B)  the opinion of legal counsel or management as to the expected outcome. 
C)  an estimate of the amount or a statement that the amount cannot be estimated. 
D)  the steps the client has taken to ensure that it doesn't recur. 
A)  the auditor's opinion as to the expected outcome. 
B)  the opinion of legal counsel or management as to the expected outcome. 
C)  an estimate of the amount or a statement that the amount cannot be estimated. 
D)  the steps the client has taken to ensure that it doesn't recur.

Question 15

The standard letter of confirmation from a client's legal counsel should ask for information about the period of time

Accepted Answer

A)  covered by the client's financial statements. 
B)  covered by the client's financial statements plus the preceding year. 
C)  covered by the client's financial statements plus the succeeding year. 
D)  approximately up to the date of the auditor's report. 
A)  covered by the client's financial statements. 
B)  covered by the client's financial statements plus the preceding year. 
C)  covered by the client's financial statements plus the succeeding year. 
D)  approximately up to the date of the auditor's report.

Question 16

Discuss the purpose of a management letter.

Accepted Answer

The purpose of a management letter is to

Question 17

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

Accepted Answer

A)  low risk for inherent risks that required information may not be disclosed in the notes 
B)  medium for control risk with respect to identifying relevant events 
C)  medium with respect to providing adequate detail for the notes 
D)  high risk that all required information may not be disclosed in the notes 
A)  low risk for inherent risks that required information may not be disclosed in the notes 
B)  medium for control risk with respect to identifying relevant events 
C)  medium with respect to providing adequate detail for the notes 
D)  high risk that all required information may not be disclosed in the notes

Question 18

State the three conditions required for a contingent liability to exist.

Accepted Answer

Three conditions required for a continge

Question 19

The auditor's responsibility with regards to contingent liabilities is to

Accepted Answer

A)  identify the appropriate accounting treatment. 
B)  decide on the appropriate accounting treatment. 
C)  prepare note disclosure. 
D)  evaluate the accounting treatment of known contingent liabilities. 
A)  identify the appropriate accounting treatment. 
B)  decide on the appropriate accounting treatment. 
C)  prepare note disclosure. 
D)  evaluate the accounting treatment of known contingent liabilities.

Question 20

At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the

Accepted Answer

A)  management letter. 
B)  representation letter. 
C)  engagement letter. 
D)  letters testamentary. 
A)  management letter. 
B)  representation letter. 
C)  engagement letter. 
D)  letters testamentary.

The primary objective of analytical procedures used in the final review stage of an audit is to

You sent a legal letter to a lawyer who had invoiced your client. The lawyer replied that "his practice consists of conducting real estate closings, and so he could not respond to the letter." What impact does this have on the financial statement audit?

An important part of evaluating whether the financial statements are fairly stated is summarizing the misstatements uncovered in the audit. Whenever the auditor uncovers misstatements that are in themselves material,

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork. The auditor should

Subsequent events affecting the valuation of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

State the three conditions required for a contingent liability to exist.

State the three main reasons why it is essential that working papers be thoroughly reviewed by another member of the audit firm at the completion of the audit.

Kendra is inquiring about subsequent events with regards to lawsuits and contingent claims. To obtain a meaningful answer, Kendra should hold the enquiry with

The following events all occurred after the balance sheet date (6/30/15) but prior to the auditor's report (9/10/15). Which one would require an adjustment to the account balances as of 6/30/15?

What audit approach is used to search for unknown commitments?

State three types of information that should be included in a standard letter of inquiry of a client's law firms.

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and

The standard letter of confirmation from a client's legal counsel should ask for information about the period of time

Discuss the purpose of a management letter.

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

State the three conditions required for a contingent liability to exist.

The auditor's responsibility with regards to contingent liabilities is to

At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

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Exam 18: Completing the Audit

The primary objective of analytical procedures used in the final review stage of an audit is to

You sent a legal letter to a lawyer who had invoiced your client. The lawyer replied that "his practice consists of conducting real estate closings, and so he could not respond to the letter." What impact does this have on the financial statement audit?

An important part of evaluating whether the financial statements are fairly stated is summarizing the misstatements uncovered in the audit. Whenever the auditor uncovers misstatements that are in themselves material,

A client acquired 25% of its outstanding capital stock after year-end and prior to completion of the auditor's fieldwork. The auditor should

Subsequent events affecting the valuation of assets ordinarily will require adjustments of the financial statements under examination because such events typically represent the

State the two primary types of subsequent events that require consideration by management and evaluation by the auditor and give two examples of each type.

State the three conditions required for a contingent liability to exist.

State the three main reasons why it is essential that working papers be thoroughly reviewed by another member of the audit firm at the completion of the audit.

Kendra is inquiring about subsequent events with regards to lawsuits and contingent claims. To obtain a meaningful answer, Kendra should hold the enquiry with

The following events all occurred after the balance sheet date (6/30/15) but prior to the auditor's report (9/10/15). Which one would require an adjustment to the account balances as of 6/30/15?

What audit approach is used to search for unknown commitments?

State three types of information that should be included in a standard letter of inquiry of a client's law firms.

When the proper disclosure in the financial statements of material contingencies is through footnotes, the footnote should describe the nature of the contingency to the extent it is known and

The standard letter of confirmation from a client's legal counsel should ask for information about the period of time

Discuss the purpose of a management letter.

Which level of risk does the auditor normally assign to the presentation and disclosure-related assertion of completeness for contingent liabilities and subsequent events?

State the three conditions required for a contingent liability to exist.

The auditor's responsibility with regards to contingent liabilities is to

At the completion of the audit, management is asked to make a written statement that it is not aware of any undisclosed contingent liabilities. This statement would appear in the

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters